I sound like an old timer when I say this, but in my day, startups didn’t have cookie time and mentors spending hours rehearsing pitches with us. We worked in spare rooms on decrepit laptops and just muddled through till we got a sale. Which is true, but only half the truth.
The rest of the truth is that even though it didn’t feel easy at the time, it was easier than it is now to get a break. The space wasn’t sexy. There were fewer of us around. There was no ecosystem. You didn’t spend months speaking to people who understood you but didn’t need you, before getting to your actual audience. You built a product, you struggled to get a meeting, you pitched to the person with the need, you struggled to get through procurement. Eventually you got brought in, and soon enough you got bought out. That’s not everyone’s story, but it’s a common story.
Notice what’s missing? No VCs. No POCs. No mentors. We got to mess it up all on our own and mess it up we did, spectacularly and often. The indulgence (of the they are pre-seed, give them a break variety) didn’t exist, but neither did all the layers of people dealing with the startups as if it was an outing to the circus, with no intention to buy.
A whole industry has emerged to cater to the going-to-the-circus behaviour. Look at the startups, don’t feed the entrepreneurs. Or perhaps feed them a little – enough to keep them going.
This is no joke if you’re a founder. How do you ensure you navigate through this without ending up in the petting zoo? There are so many dos and don’ts, and this is by no means exhaustive, but after years in this space, wearing multiple hats, below are the four things I see folks getting spectacularly wrong all too often.
Don’t burn the meeting with the big guns
The ecosystem has many faults, but it brings huge advantages. For one, it can get you in the room with people who have the ability, position and desire to make decisions. Here’s a tip for free: never ever go to a meeting with a senior decision maker without being prepared to ask for something. This applies to corporate employees, ‘intrepreneurs’ and entrepreneurs. You had time with the big shots. Great. What did you ask for? If you asked for nothing, more fool you.
You had time, access, attention and headspace. The people who can make the decisions that can change your life were right there in front of you. What did you put in front of them?
Which game do you bring when your A game isn’t relevant?
We coach startups to pitch for funding, which is fine and dandy but it is its own thing. The problem is the human mind simplifies to cope. Mentors help startups build a story for investors. We even classify startups in terms of their investment “maturity stage” and the vertical they represent in a VC world, not in terms of the business value they bring.
This is a trap, as the founders develop habits that are only suitable to some conversations. Spend too much time around VCs and you learn to tell the story they want to hear. It’s not the VCs’ fault. The VCs are doing their jobs, so are you doing yours?
Your clients and your investors don’t want to hear the same story. If you only have one story and it’s not the right one for the audience, it doesn’t matter how good it is.
Don’t burn the meeting. Figure out what you want from the person in the room. If you don’t know yet, don’t take the meeting until you work it out, because there may never be another meeting. Working this out is part of your business plan. Don’t neglect it. You are a business, not a showpiece. Your valuation is great, but your sales are greater.
Are you trying to sell or are you mouthing the words?
Only they are not … your sales … they’re not great yet. You are a startup. That’s how it goes. So the valuation matters. Investors will inject cash to get you going if they’re good – they will open doors and get customers in for you to pitch to, but you still need to do the selling. Plus, they don’t all do that, and you often need to fend for yourself. You want to pitch a sale, but you know that quite often corporates will digest a POC better, so it becomes your go-to; the entry model of digital transformation.
Beware … not all POCs are safe to eat. For starters, you cannot charge for all POCs, and somehow most startups commit the faux pas of trying to charge for the wrong kind and the cardinal sin of not charging for the right kind. Simple rule of thumb: If the client asks for a POC to validate an assumption or business idea they had, you charge. You are providing a service, you are helping them on their journey. You charge.
If the POC is actually a proof of tech or proof of value to sway an unconvinced customer, you don’t charge – it’s part of your sales effort. You may need the cash, but you still don’t charge. If you do, you send the signal of “eager to prove myself and land a client so I can pay the rent”. Don’t do it, much as you need the rent paid. It will undermine your credibility and ability to negotiate like a grown-up if the time to do so comes. Which it won’t, because your POC isn’t answering a burning question for your client; at best, it gave them some PR credit. Unless they asked for it. Unless it matters to them. That’s the POC you want: tied to a problem. That’s the money you want: tied to a business case. That’s superior money, irrespective of how much of it there is on the table.
Oh, and while you’re at it, don’t try consultative sales. Yes, they are the best way to sell deep into the organisation and establish a time horizon, but you don’t start there. You end up there. And if you kick off with, “I would like to hear about your challenges and how I can help you,” when you’re a single-product startup, you may never grow up to do consultative sales. Focus on what you do; focus on what you will ask for and go for the vanilla sale. You will hopefully grow into the other stuff. First stand – running comes later.
Not all advice is worth taking, even mine, but listening never hurt anyone
Bankers will want the moon on a stick, for free. Accelerators will push you towards a dog-and-pony-show mentality. VCs will care about your valuation, not your value. Gross generalisations, but you get the point. Ultimately, a business needs clients, so keep your eye on the ball.
Keeping a balance between not being an obtuse know-it-all and not becoming an all-singing-all-dancing shadow of a firm is hard. The temptation to go where the light is brighter, the instructions clearer and the money easier to access is going to be overwhelming at times, but some money is empty calories. It’s not repeatable, it doesn’t get itself to work, and in the end the price you pay for it is too high.
Remember that paying customers a business makes. Your valuation is great and it may make you personally rich, but it won’t turn itself into sticky revenue. If you’re in it just for the exit, then by all means play the game of thrones – you’re in the right place. But if you genuinely want to build a business, ask yourself: what does it look like? What do you need to get there and what will you pitch, offer and ask for in those big meetings? And while you’re at it, check in with yourself: do you want it enough?
Building a business is hard graft, saying no to the wrong kind of money is harder still and the sacrifices you will need to make may well not feel worth it. Do you want it, whatever it is, enough to do it right?
Wanting it is no guarantee of success, but at least it should be a guarantee of direction and a shielding spell against joining the circus.
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